Macroprudential Regulation, Quantitative Easing, and Bank Lending.

The article investigates how macroprudential accounting regulations, specifically the use of historical cost accounting (HCA) versus mark-to-market accounting (MMA), influence the transmission of monetary policy onto bank lending, focusing on Italian banks. Using detailed supervisory and credit register data around the European Central Bank’s Public Sector Purchase Programme (PSPP) announcements in 2015 and 2019, the study finds that HCA mutes the pass-through of quantitative easing (QE) and other yield curve management policies onto bank lending by limiting banks’ regulatory capital recapitalization. In contrast, MMA valuation of sovereign securities allows monetary policy shocks to increase lending more substantially, especially among less capitalized banks, primarily through the recapitalization channel rather than portfolio rebalancing or liquidity effects. The findings extend beyond QE to other monetary policy shocks affecting long-term yields and suggest that hybrid accounting approaches or time-varying capital requirements could preserve the stabilizing benefits of HCA while enabling effective monetary policy transmission.